Here’s a rather unsympathetic assessment of how financial markets reacted to Janet Yellen’s speech from David Lamb, head of dealing aFEXCO Corporate Payments. He says traders are “unable to see their terminals for the egg on their faces”.

Eggy faces? Photograph: McCoy Wynne / Alamy/Alamy

Lamb comments:

“The currency markets frequently live and die by the ‘shoot first and ask questions later’ motto. Today they were asking awkward questions just seconds after firing.

“No sooner had the Fed’s Chair uttered the magic words ‘the case has strengthened’ and trigger-happy traders were snapping up dollars in expectation of an near-immediate rate rise.

“But as the seconds ticked by, it became increasingly clear that a hike is inevitable, but not imminent.

“Cue a huge correction that saw the dollar slump well below its pre-announcement levels – leaving many traders unable to see their terminals for the egg on their faces.

“The caveats came thick and fast. There’s a range of possible rate rise scenarios, they could still be blown of course, and the killer line – gradual hikes are appropriate.”

US stock markets are rallying in the wake of Janet Yellen’s speech, says Chris Beauchamp, chief market analyst at online trading company IG.

He believes Yellen opted to “please both hawks and doves”.

Beauchamp comments:

“The ‘Dip-buyers anonymous’ team is working at full steam this afternoon, as Janet Yellen finds the right tone to encourage investors to step back into the market at the end of a tedious week. Clearly a modest rise in rates is taken as a sign of confidence in the economy, while the passing reference to other policy measures being potentially necessary in future crises was viewed as leaving the door open to the kind of broader monetary stimulus practised by the European Central Bank and the Bank of Japan.”

Looking ahead, he adds:

“Given the enthusiastic reception equity markets have given Janet Yellen, it looks like the steady grind higher will continue into the end of August.”

Andrew Hunter, US economist at the consultancy Capital Economics says Janet Yellen’s comments are “consistent with a US rate hike by year-end”.

To re-cap, the Fed chair said the case for rate rises had strengthened, she rebuffed suggestions monetary policy had lost some of its power and made that now so familiar call from central bankers for fiscal policy to do its share of the heavy lifting.

But there was little in the way of guidance on when US interest rates might rise and so markets were left doing a little dance that I would sum up - if readers will forgive the lack of sophistication - as “Oh no, rate hikes!!! Oh, hang on, as you were, nothing’s imminent.” In other words, the dollar rose and then the dollar fell. Stocks trimmed gains and then recovered.

Hunter at Capital Economics says Yellen’s acknowledgement that “the case for an increase in the federal funds rate has strengthened” would appear to increase the likelihood of a near-term rate hike.

He continues:

“On balance, however, we think most officials will want to see more concrete evidence of a rebound in GDP growth and a rise in inflation towards the 2% target, with a December move still appearing the most likely outcome.

“In a fairly upbeat assessment of current economic conditions, Yellen acknowledged the recent strength of consumption, despite the weakness of GDP growth. She also highlighted that even that subdued pace of growth “has been sufficient to generate further improvement in the labour market”. However, she repeated the warning that the future path of monetary policy will depend on the incoming data.”

And on the consultancy’s view on when rates will rise, Hunter concludes:

“Overall, along with the more upbeat tone of the recent data, we think the odds of a September rate hike have probably increased. They will increase further if we are right in forecasting that non-farm payrolls increased by a solid 180,000 in August (data due next Friday). Nonetheless, with real GDP expanding by just 1.2% over the past 12 months and inflation continuing to run below target, we still think most Fed officials will want to wait until December before next raising rates.”

Here are some reassuring words for any readers struggling to make sense of today’s Jackson Hole speech from Janet Yellen.

Our economics editor, Larry Elliott, says the Fed Chair’s address provided an opportunity for “Wall Street to play one of its favourite games: interpreting a speech by Janet Yellen.”

He writes:

“Truly, in terms of making her pronouncements cryptic, the most powerful central banker in the world is the daughter and heir to her predecessor but one, Alan Greenspan.

Nothing Yellen has come up with comes close yet to Greenspan’s “I know you think you understand what you thought I said but I’m not sure you realise that what you heard is not what I meant” but her presentation at the Jackson Hole symposium was a pretty good effort.”

Rob Carnell, chief international economist at the bank ING says it was a speech full of caveats from Janet Yellen and that “a September rate hike remains awkward to sell to markets unless the inflation data start to move higher”.

He has pulled out two main messages, and one sub-message, from the lengthy Jackson Hole speech.

“The first of the main messages was that the economy has continued to improve and that made the case for a rate hike more likely in the months ahead.

“But “more likely” does not mean “likely”, and markets are still reluctant to buy into a September rate hike story, at least without more information on the evolution of jobs growth, the pace of economic activity, or higher inflation.

“The second message, which we suspect markets may also have problems accepting at face value, is that in the event of a return to crisis, more quantitative easing, coupled with “forward guidance” would likely provide sufficient stimulus to avert catastrophe (our words). This message might very well be filed under the heading of “Well, they would say that wouldn’t they.”

“But buried at the end of the speech, after a section that seemed to draw heavily on the recent paper by the San Francisco Fed President, John Williams’, Yellen proposed an enhanced role for fiscal policy. She talked about the need for measures designed to improve productivity (fiscal, not monetary), as well as enhancing (fiscal) automatic stabilisers. A cynic might paraphrase the speech as “Things are looking brighter, but if it all goes wrong don’t panic, there’s always fiscal policy”.”

“Her speech was undeniably hawkish. She said the case for a rate hike has strengthened in recent months. Also, the US economy continues to expand and has reached maximum employment with price stability. This saw the dollar pop higher initially and precious metals fall. Nevertheless, she anticipates that gradual rate hikes are appropriate...

“But as is so often the case, the initial market reaction can be misleading. As traders scanned below the headlines for the meat in the speech, perceptions over Dr Yellen’s thinking changed. Gold and silver have surged as the dollar slumped. Possibly this is connected to her comments that the overall economic situation remains uncertain.”

“Although fiscal policies and structural reforms can play an important role in strengthening the U.S. economy, my primary message today is that I expect monetary policy will continue to play a vital part in promoting a stable and healthy economy. New policy tools, which helped the Federal Reserve respond to the financial crisis and Great Recession, are likely to remain useful in dealing with future downturns. Additional tools may be needed and will be the subject of research and debate. But even if average interest rates remain lower than in the past, I believe that monetary policy will, under most conditions, be able to respond effectively.”

There are echoes of Bank of England governor Mark Carney, who shortly after the EU referendum said: “The charge that central banks are out of monetary ammunition is wrong, but the widespread absence of global price pressures demands that our firepower be well aimed.”

Also reacting to Janet Yellen’s speech at Jackson Hole, Lee Ferridge, head of multi-asset strategy at State Street Global Markets North America has shared this view:

“Despite recent hints of an ongoing policy rethink at the FOMC [Federal Open Markets Committee], Janet Yellen’s Jackson Hole speech did not break much new ground. Her comments could help arrest the dollar’s recent decline and deal a blow to the rally in risky assets that we have seen in recent weeks. A move at the September meeting remains less likely but a move before year end now looks a distinct possibility should US data continue to improve.”

Some more reactions coming in to Janet Yellen’s speech now, which as we noted earlier left the markets in a bit of a muddle.

The dollar initially strengthened as the Fed chair hinted at further rate rises but then lost those gains, possibly as the timing of any such tightening seems to be some way off. Similarly, stock markets initially trimmed gains on the prospect of higher interest rates and then rose again when traders had digested Yellen’s remarks and decided it was too soon to worry.

“While the bulk of Yellen’s opening remarks at Jackson Hole focussed on monetary policy over the long term, she stated that in her opinion the case for a rate hike has strengthened in recent months. But the lack of any specific signal with regards to the September meeting means markets are unlikely to react adversely to this fairly throwaway comment. Yellen’s comments were largely focussed on the debate around the effectiveness of the Fed’s toolkit.

“Of course she defended the success of previous policy and indeed the ability of the Fed to respond effectively in the future, however she wasn’t shy of highlighting the need for government to assist in the heavy lifting through the use of supportive fiscal policy – a plea we regularly hear from ECB President Mario Draghi.

“However the elephant in the room is that the Fed may well be worshipping at a false idol. There’s more and more evidence to show that inflation just isn’t behaving in the way that economists think it should. The Fed should stop targeting consumer inflation and start looking at a wider suite of measures to judge the health of the economy and the appropriateness of their policy. Sadly it looks like the wide open plains of Wyoming have not inspired any soul searching.”

So it’s a hawkish message from Yellen, but is she telling us anything we didn’t know already?

Well, markets appear to be struggling to make sense of the message from Yellen. US stocks initially trimmed gains only to rise again. The dollar has now reversed its initial gains against the pound and euro.

Here are some of the early reactions (including from UK commentators, who are counting down to a long weekend with a public holiday on Monday):

Those remarks on a stronger case for rate hikes in the US have seen US stock markets trim some of their gains and pushed the dollar up against the euro and pound.

This key extract from the speech shows Janet Yellen and her fellow policymakers are still keen to come across as avid data watchers, but she clearly sees a better case for rate rises:

“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee’s outlook,” she said.